Foreign Firms in Algeria Boost Security

Foreign energy companies in Algeria began evacuating workers and increasing security in the wake of the first attack on a gas field in the North African country.

Wednesday's attack on the In Amenas field, which led to the deaths of several expatriate hostages, prompted the companies that run the operation alongside Algeria's state energy company Sonatrach—BP PLC of Britain and Statoil of Norway—to reassess their security operations.

"International oil companies themselves will respond by increasing their security protocols, minimizing personnel and in general adapting to a new environment," but they are unlikely to withdraw altogether, said Geoff Porter, founder of North Africa Risk Consulting.

BP said Thursday that it had already started pulling "nonessential" workers, understood to mean foreigners, out of the country. Statoil said it has increased security at its other facilities in Algeria.

The attack shut down production of In Amenas, a major field which at full capacity could produce 9 billion cubic meters of gas a year and 50,000 to 60,000 barrels a day of liquids. It was unclear Thursday whether the field or its facilities suffered any damage.

The Algerian incident, which highlighted worries over the geopolitical risk that could threaten oil and gas operations, contributed to a rise in oil prices.

Algeria, a member of the Organization of Petroleum Exporting Countries, is one of Europe's main natural-gas suppliers, as well as a key producer of high-quality crude oil that is easy to refine into high-value gasoline.

Neighboring Libya, whose border is only 19 miles from In Amenas gas, is equally important.

Algeria is Europe's third-largest gas supplier, after Russia and Norway, with most of its piped gas flowing to Italy and its liquefied natural gas shipped globally.

Underscoring Algeria's importance, Italian gas company Snam SpA said Thursday it has registered a drop of more than 13% in imports of gas from a pipeline coming from Algeria since the attack early Wednesday.

Risks to foreign energy companies operating in Algeria have improved since the 1990s civil war, but remain high. Until Wednesday's attack in south, the greatest risks have been to foreign workers in the heavily populated northern coastal strip. For example, gunmen attacked and injured several workers for oil-services company Halliburton near Algiers in December 2006.

In contrast, the southern desert area where Algeria's oil and gas producing facilities are predominantly located—including In Amenas—are heavily guarded by the Algerian army and security forces and have seen no large-scale attacks until this week. The break in this peace is a worrying precedent, said experts on the region.

"There has long been an unwritten agreement between the Algerian security forces [and Islamist militants] that the oil industry wouldn't be attacked," said Charles Gurdon, North Africa expert at political risk consultancy Menas Associates.

That, he said, might have changed after Algeria provided support to French military forces that began battling Islamist rebels in neighboring Mali last week amid fears insurgent groups with links to al Qaeda could seize control of Mali and gain a base from which to launch attacks overseas.

He said some elements in Algerian security forces could be angry about Algeria's participation in the mission. Mr. Gurdon said the desert where the In Amenas facility is located allows the forces to see for miles around and that they must have seen the militants arriving.

"What you're seeing now is a situation where the Algerians," both the Islamists and some elements in security forces, "are demonstrating their displeasure over Mali," he said.

Al Qaeda in the Islamic Maghreb claimed responsibility for the In Amenas attack and called it retaliation for the Mali operation. The claim couldn't be verified.

Security experts said Algerian authorities may now need to rethink the way security is handled, allowing more foreign involvement in the process.

In other high-risk resource-rich countries, such as Iraq, foreign companies commonly employ private Western security companies that are staffed by armed expatriates. Algeria, in contrast, keeps the majority of armed security personnel local, said one security consultant.

Typically in Algeria, an oil company hires a foreign contractor to advise on security or to head a team, but the majority of the personnel carrying arms are limited to Algerians, the person said. Some of that security is provided by companies set up by retired Algerian generals, the person said.

The system could result in lower-quality security, he said. "Even before the French were in Mali, Algeria hasn't been the safest place to operate in for a long time," the security consultant said.

Mr. Porter added, "Algeria will respond with increased troop presence in the region and around oil installations."

The In Amenas attack also highlights potential security issues for the oil industry elsewhere in the region, said Peter Hutton, an analyst at RBC Capital Markets.

France's Total and GDF Suez operate oil and gas fields in the southern region of Algeria. Total also has significant operations in neighboring Libya.

Total's facilities in Yemen have already been subject to numerous attacks by groups linked directly or indirectly to al Qaeda in the Arabian Peninsula, Mr. Hutton said.

"If the attack is an indication of reaction to the French intervention, it might be sensible to assume that Total operations may be under increased risk," said Mr. Hutton.

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